What must a Crown Gold Exchange franchisee do if they grant an 'all assets' security interest to a lender?

According to the 2024 Crown Gold Exchange Franchise Disclosure Document, a franchisee is prohibited from granting a security interest in the Franchise Agreement itself. However, if a franchisee grants an "all assets" security interest to a lender, they must ensure that the lender expressly exempts the Franchise Agreement from that security interest.

This provision protects Crown Gold Exchange's interest in maintaining control over its franchise agreements. By requiring the exemption, Crown Gold Exchange ensures that the agreement cannot be seized or transferred by a lender in the event of the franchisee's default. This is a fairly standard clause in franchise agreements, as franchisors want to maintain control over who operates their branded businesses.

For a prospective Crown Gold Exchange franchisee, this means that when seeking financing and granting a security interest over all assets, they must specifically negotiate with the lender to exclude the Franchise Agreement from the security interest. Failure to do so could result in a breach of the Franchise Agreement and potential termination of the franchise.